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Role of the guidance guarantee

This article is part of
Guide to The Brave New Pensions World

It is open to individuals with defined contribution, or money purchase pensions at the point of their retirement.

Customers can choose to get help either by a face-to-face session with the Citizen’s Advice Bureau or over the telephone with the Pensions Advisory Service. A website set up with the support of the Money Advice Service and run by the Treasury is also available.

Individuals will be encouraged to book a session two weeks in advance and provide standardised information about all their pension savings, along with any other sources of savings and debt they and their spouse have.

Sessions will last 45 minutes and give individuals the opportunity to discuss their options. Pension Wise won’t recommend pension providers or products or tell people how to invest their money and individuals will be given a summary document outlining their options.

Providers will be pointing clients towards the Pension Wise guidance service should they not have taken advice or guidance before.

Claire Trott, head of technical support at Talbot and Muir, says a Pension Wise session is likely to cause delays for those wanting to access their benefits and not wanting to take guidance or advice.

In addition to this, there is now going to be additional requirements, called “the second line of defence” for providers to obtain information from clients and give related risk warnings based on this information to those clients who want to access their benefits.

Because the warnings will be determined by the responses to the questions, again Talbot & Muir’s Ms Trott says there may be a delay and the warnings will only be as good as the responses provided.

She says: “It is a danger that not all the relevant information will be disclosed by the clients so they miss out on the most important risk warnings to them.”

How the guidance guarantee will actually work in practice remains an unknown, Martin Tilley, director of technical services at Dentons Pensions Management, points out.

Despite being announced nearly a year ago, Mr Tilley says the progress towards delivery seems to have been stagnant until the last few months. He says it appears to be being rolled out in a hurry.

Mr Tilley says: “I have my doubts it will be fit for the purpose it was intended to fulfil at launch in April.

“It will be fine turned and fettled over time but the worry is damage could be done at the early stages. To work effectively, it should recognise its limits and refer to independent financial advisers when the limits are reached.”

John Lawson, head of policy (retirement solutions) at Aviva, is optimistic about take-up of Pension Wise questioning why wouldn’t savers go along for a free second opinion or some education?

However in terms of the outcome David Macmillan, managing director of Aegon, says he expects most people who access Pension Wise will not find a definitive answer from their session but find themselves being referred on to a financial adviser.